Allahabad H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was liable to penalty under the provisions of s. 18(1)(c) of the WT Act, 1957, r/w Expln. 4 to s. 18(1)(c) of the WT Act, 1957, despite the Press Note dt. 27th May, 1968, issued by the Ministry of Finance and Circular No. 8-WT dt. 15th Nov., 1968, issued by the CBDT ?

High Court Of Allahabad

Mohd. Farooq vs. CIT

Section WT 18(1)(c)

Asst. Year 1979-80, 1980-81

R.K. Agrawal & Prakash Krishna, JJ.

WT Ref. No. 65 of 1992

31st March, 2005

Counsel Appeared :

S.D. Singh, for the Assessee : A.N. Mahajan, for the Revenue

JUDGMENT

R.K. Agrawal, J. :

The Tribunal, Allahabad, has referred the following question of law under s. 27(1) of the WT Act, 1957 (hereinafter referred to as “the Act”), for opinion to this Court :

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was liable to penalty under the provisions of s. 18(1)(c) of the WT Act, 1957, r/w Expln. 4 to s. 18(1)(c) of the WT Act, 1957, despite the Press Note dt. 27th May, 1968, issued by the Ministry of Finance and Circular No. 8-WT dt. 15th Nov., 1968, issued by the CBDT ?”

2. The reference relates to the asst. yrs. 1979-80 and 1980-81 in the proceedings arising out of penalty imposed under s. 18(1)(c) of the Act.

3. Briefly stated, the facts giving rise to the present reference are as follows :

4. The respondent-assessee is the owner of the premises No. 171, Jajmau, Kanpur, which consists of a tannery and a residential portion. The premises were leased out to M/s Bhopal Tannery and Glue Works at a monthly rent of Rs. 3,000. The applicant got the property valued from the approved valuer and he also filed the copies of the valuation report along with the return. The value of the property was disclosed as per the valuation made by the valuer. The WTO referred the property for valuation under s. 16A to the Valuation Officer, Unit II, Kanpur, who valued the property by the land and building method at Rs. 9,04,500 for the asst. yr. 1979-80 and Rs. 11,14,600 for the asst. yr. 1980-81, which was adopted by the assessing authority while framing the assessment. In further appeal, the AAC, Kanpur, vide order dt. 24th Jan., 1986, applied the average of the land and building method and the rental method and determined the value of the property at Rs. 6,10,000 for the asst. yr. 1979-80 and Rs. 6,98,000 for the asst. yr. 1980-81. In further appeal, the Tribunal vide order dt. 29th Jan., 1987, disposed of the appeal by holding that the rental method should only be adopted. The Tribunal also found that in the lease deed repairing was not the liability undertaken by the assessee and, therefore, in computing the value on rental basis the deduction for repairing should not be allowed and the value on the rental method be taken by adopting 12.5 multiple.

5. The WTO initiated penalty proceedings under s. 18(1)(c) of the Act and levied penalty amounting to Rs. 2,450 and Rs. 5,500, respectively, for the two assessment years in question. Feeling aggrieved, the applicant preferred an appeal before the Dy. CWT(A) who has affirmed the penalty order. Still feeling aggrieved, the applicant preferred a further appeal. The Tribunal has partly allowed the appeal. While upholding the imposition of penalty, the Tribunal has directed to levy minimum penalty leviable under s. 18(1)(c) of the Act.

6. We have heard Sri S.D. Singh, learned standing counsel for the applicant, and Sri A.N. Mahajan, learned counsel appearing for the Revenue.

7. Learned counsel for the applicant submitted that along with the return the applicant had submitted the report of the approved valuer and the property in question had been valued as per valuer’s report and, therefore, there was no concealment on his part. He further submitted that in view of the circular dt. 7th June, 1968, issued by the CBDT, vide Circular No. 4P (LXXVI-65), no penalty was imposable. In the circular dt. 7th June, 1968, the CBDT has reproduced the speech of the Dy. Prime Minister made in the Lok Sabha on 29th April, 1968, at the time of moving the Finance Bill, 1968, and had directed that his observations have to be carefully kept in view. The relevant paragraph of the speech has been reproduced in the circular, which reads as under : “Further, there should ordinarily be no occasion for the levy of penalty for understatement of the value of an asset in cases in which the assessee supports his valuation by the report of an approved valuer; and the taxpayer can thus readily protect himself from the possibility of penalty proceedings.”

8. It is well settled by a catena of decisions of the apex Court that the circular issued by the CBDT under s. 13 of the Act, as it stood during the relevant period, is binding upon the authorities. Thus, in view of the aforesaid circular which still holds the field, the penalty could not have been imposed as the value of the asset declared by the applicant was as per the report of the approved valuer.

9. Moreover, the valuation of the property in question as disclosed by the applicant was based on the report of the approved valuer duly approved by the Department. There is bound to be a difference in the valuation report given by different Valuation Officers whether they are approved valuers or Departmental Valuers. Moreover, the value can differ on account of different methods of valuation being adopted. In the present case, the difference arose because of different methods of valuation adopted by the approved valuer and by the Departmental valuer. Thus, no case of concealment even otherwise is established.

10. In view of the foregoing discussions, we answer the question referred to us in the negative, i.e., in favour of the assessee and against the Revenue. There shall be no order as to costs.

[Citation : 280 ITR 484]

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